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A. General Requirements

1. Liquidity. VASPs providing Lending and Borrowing Services shall, at all times, ensure that—
 
  a. they have sufficient Virtual Assets to provide services and satisfy client obligations; and
  b. sufficient collateral has been posted by borrowers in accordance with agreed amounts,
  and that both are monitored and audited on a regular basis.
 
2. VASPs providing Lending and Borrowing Services shall notify VARA immediately if the requirements in Rule II.A.1 of this Lending and Borrowing Services Rulebook are not met, or may not be materially met in the foreseeable future.
3. Withdrawals. VASPs providing Lending and Borrowing Services shall ensure all clients are fully aware when Virtual Assets are not able to be withdrawn as part of the Lending and Borrowing Services they provide. To the extent Virtual Assets are able to be withdrawn, VASPs shall ensure all clients can withdraw such Virtual Assets at all times, and complete withdrawal requests so that Virtual Assets which are the subject of such requests are transferred in accordance with client instructions within twenty-four [24] hours, subject to any factors outside of the VASP’s control including limitations or malfunctioning of any DLT not controlled by the VASP or its Group.
4. Collateral. All Virtual Assets held by a VASP providing Lending and Borrowing Services may only be used in accordance with the terms of its Lending and Borrowing Services which, in addition to the requirements in Rule II.E of this Lending and Borrowing Services Rulebook, shall be clearly set out in its Client Agreements. VASPs providing Lending and Borrowing Services shall ensure that they have adequate governance frameworks, policies, systems and controls in place to manage how collateral is held and that it is used responsibly, including in line with Client Agreements at all times.
5. Virtual Assets of a client used by a VASP in the course of, or in connection with, the provision of any Lending and Borrowing Services shall be held on behalf of the client unless the Client Agreement expressly states otherwise.
6. Counterparty due diligence. VASPs providing Lending and Borrowing Services shall, on a regular basis, conduct comprehensive due diligence on all clients and counterparties such that they are satisfied that client Virtual Assets are not subject to undue counterparty risk. In particular, VASPs shall collect and verify the following information of each counterparty—
 
  a. the purpose[s] of loans;
  b. the nature and type of business;
  c. financial situation and overall liquidity; and
  d. all other information which a prudent lender would require to assess risk associated with a particular loan.